'Fragile middle' threatens global brands

LONDON: Some 2.8bn people around the world live on between $2 and $10 a day, forming a "fragile middle" that is always at risk of falling back into poverty, a new analysis has shown.

The Financial Times examined World Bank income data distribution from 122 developing countries and concluded that while millions had been lifted out of poverty since the 1970s, many still lived a precarious existence.

It noted that to qualify for the Asian Development Bank's definition of middle class one had to be earning more than $2 a day (adjusted for purchasing power) but that others favoured a higher figure of $10. Fully 40% of the world's population fell between these two amounts, making the "fragile middle" the world's "biggest income group".

Further, the FT observed that around one third of this number, or 952m people, were earning $2-$3 daily and were particularly vulnerable. World Bank data showed, for example, that in Indonesia more than half of those below the poverty line had been above it a year earlier.

Most businesses in that country were small or micro enterprises and while their owners might meet the definition of middle class they were effectively "subsistence entrepreneurs" vulnerable to the unexpected, according to Rasyad Parinduri, an economist at Nottingham Business School's campus in Malaysia.

Parinduri has carried out research showing that the death of a family member in the preceding five years had reduced their assets by an average of 30%.

While decades of growth have helped to create new markets and enthusiastic consumers, the FT said that "put in a global context, the number of solidly middle-class people remains small, while the fragile middle has grown exponentially".

Kaushik Basu, chief economist of the World Bank, said thought that this was "a very important moment in global economic history".

"But it is a very strange moment," he added, "because the biggest underlying challenges are not the most visible challenges."

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